Entry regulations and optimal prize allocation in parallel contests

In parallel contests, the contest organizer controls the entry of heterogeneous contestants by regulating access to the contests and determining the prize allocation across contests. The organizer can prevent a contestant from entering more than one contest. I show that the organizer allows entry to multiple contests and uniquely sets identical prizes across contests to maximize aggregate effort in all contests. Independent of the entry regulation, I find no sorting effects. Thus, a contest with a relatively high prize does not necessarily attract contestants with higher abilities. Furthermore, I discover interesting spillover effects of prizes between contests in the case of restricted entry regulations. For instance, the individual (aggregate) effort increases (decreases) in a contest if the prize in another contest increases. The endogeneity of contestants’ participation drives many of these results.

EVALUATING THE DETERMINANTS OF FORMAL ENTREPRENEURSHIP: AN INSTITUTIONAL ASYMMETRY PERSPECTIVE

Our study explores the effect of institutions in determining the prevalence of formal entrepreneurship and investigates the entrepreneurial choice in response to these institutions. To pursue the objectives of the study, we utilized eleven years of data from 23 countries of the Asian region. As explanatory variables, entry regulations were taken as a proxy measure of formal institutions; whereas, social capital was considered a proxy measure of informal institutions. Based on the nature of data, we applied a pooled OLS regression model to examine the influence of explanatory variables on the entrepreneurial choice. The findings proclaimed that at an individual level, both formal and informal institutions have a negative effect on entry into formal entrepreneurship. Further, the estimations of the interaction terms revealed the existence of asymmetry between formal and informal institutions regarding that negative influence on entry into formal entrepreneurship.

Entry Regulation and Persistence of Profits in Incumbent Firms

In line with the theory of creative destruction, industries where incumbent firms generate high profits will attract entry, which should drive down profits. This disciplinary effect of entry implies that profits above the norm should not exist in the long run. Factors that affect entry—such as entry regulations—could affect this profits convergence process. Using an unbalanced panel of firm- and country-level data for approximately 13,000 firms in 33 countries between 2005 and 2013, we examine the profit dynamics of incumbent firms in the context of entry and entry regulations.

Entry Costs and the Macroeconomy

We combine a structural model with cross-sectional micro data to identify the causes and consequences of rising concentration in the US economy. Using asset prices and industry data, we estimate realized and anticipated shocks that drive entry and concentration. We validate our approach by showing that the model-implied entry shocks correlate with independently constructed measures of entry regulations and M&As. We conclude that entry costs have risen in the U.S. over the past 20 years and have depressed capital and consumption by about seven percent.

Underpricing on the Selected European Alternative Investment Markets

The phenomenon of underpricing is the subject of many studies on the stock markets, but there is still a research gap referring to the European Alternative Investment Markets, markets for small and medium companies. They are a source of capital and such an anomaly as underpricing could be a barrier for development of young companies. It means so-called money left on the table, which constrain the effectiveness of the market. The purpose of the paper is to analyze whether lower entry regulations on the European Alternative Investment Markets are correlated with the higher value of underpricing as the demonstration of higher investing risk. We calculate raw initial returns with different equilibrium prices for three European Alternative Investment Markets and confirm that NewConnect, the market with the lighter legal environment, has the highest initial returns for the first day of trading, however after one month returns turn out to be significantly lower than on the other two markets and differs for aftermarket rate of returns. Our results suggest that there is a premium for higher risk on NewConnect, but only after one month rate of returns turn out to be negative, which can suggest that market participants verify very quickly the quality of issuers.